HOW ‘’ IS CHANGING THE CHANNEL

Business is ON HOW ‘AS A SERVICE’ IS CHANGING THE CHANNEL

The appeal of ownership is obvious to many, however as technology becomes more advanced, ownership becomes less alluring. Why maintain a costly Blu-Ray collection when pay-monthly streaming services offer access to more entertainment than you could ever fit in your living room? Why buy and store physical newspapers when an online subscription can make every issue available on publication?

With this in mind, the rise of the subscription economy shouldn’t come as a surprise. According to an Economist Intelligence Unit report, some 80% of customers are already actively seeking new consumption models.

Subscription models, which offer access to tools instead of ownership, have already come to dominate the software market. The global SaaS industry is huge, and it’s only expanding further: by 2024, the IDC anticipates that it will be worth around $50 billion. Other computing solutions, including (PaaS), Hardware as a Service (HaaS), and Infrastructure as a Service (IaaS), are also growing in importance and popularity.

This guide explains what subscription-style ‘as a service’ models are, how they can benefit you and your customers, and how you can offer your customers ‘as a service’ payment models without disrupting your existing business model.

2 HOW ‘AS A SERVICE’ IS CHANGING THE CHANNEL DEFINED

For many years, data and applications were stored 1. ON-DEMAND SELF-SERVICE. This means the and accessed locally – either embedded into hard end-user can access computing capabilities drives on the machine itself, or in nearby servers. unilaterally, without talking to a salesperson, a service provider, or any other gatekeeper. It’s Cloud computing is the backbone of nearly every ‘as just the user, the applications, and the data – a service’ solution. It allows these solutions to be no human interference. accessed remotely, negating the need for substantial storage facilities. According to the US National 2. BROAD NETWORK ACCESS. All capabilities Institute of Standards and Technology, cloud are accessed via the . Essentially, computing has five essential characteristics. information and applications can be used via mobile phones, PCs, and tablet computers, but they cannot be stored on them.

3. RESOURCE POOLING. Cloud computing technology is necessarily designed to serve multiple users. Resources will be kept securely, but they will be housed alongside other people’s resources in a location that the end-user won’t be able to physically access or control.

4. RAPID ELASTICITY. This essentially just means scalability. Though it will obviously depend on the service provider, capabilities can theoretically be expanded or contracted at any time.

5. MEASURED SERVICE. Cloud computing allows resource usage to be monitored and metered in accordance with the kind of service being provided – the aim being to provide transparency for the user and the service 3 provider. HOW ‘AS A SERVICE’ IS CHANGING THE CHANNEL WHAT ‘AS A SERVICE’ SOLUTIONS ARE AVAILABLE?

‘As a service’ is a term that refers to the wide range INFRASTRUCTURE AS A SERVICE of IT solutions available on demand. There are already a wide range of services available, but as This is the single most popular cloud computing Infrastructure as a Service allows your clients to the industry grows in importance and profitability, solution, and likely the most important for resellers. benefit from cloud computing infrastructure. That the options will increase in kind. Consumers use SaaS solutions regularly in their means that instead of buying their own data centre daily lives, and business customers are also typically space and servers, they outsource it to an on- All kinds of solutions are being offered, but the four familiar with them. Design studios pay monthly for demand subscription service like Azure or most common examples are Hardware as a Service the Adobe software suite; marketers use HubSpot . This saves space and is often (HaaS), Software as a Service (SaaS), Platform as for email communications; business development cheaper than managing everything in-house. a Service (PaaS), and Infrastructure as a Service teams in all kinds of organisations use . (IaaS). These are far from the only XaaS services available. The premise is simple: instead of purchasing Others include Communications as a Service, perpetual software licenses, a business subscribes Network as a Service, Monitoring as a Service, HARDWARE AS A SERVICE for access and receives services delivered over the Mobile Backend as a Service, IT Management internet. as a Service, and many more. If an IT function is Rather than purchasing hardware such as scan- not already available as a cloud service, don’t bet ners, routers and servers outright, HaaS allows against it being available in the near future. businesses to pay for access. Some hardware, such PLATFORM AS A SERVICE as printers, will need to be housed on-site, however the HaaS model also enables customers to connect PaaS isn’t all that different from SaaS – except to hardware remotely and carry out complex, that its services are designed to facilitate software performance-intensive tasks from a distance using creation. So if your customers are IT companies their provider’s processing power. For a monthly themselves, a PaaS solution such as AppearIQ or subscription fee all ‘heavy lifting’ is undertaken App engine will allow them to pay monthly offsite, the business has no need to source their own to develop their products and applications online. expensive hardware – or find space for it.

4 HOW ‘AS A SERVICE’ IS CHANGING THE CHANNEL WHAT ARE THE BENEFITS FOR THE IT CHANNEL?

The IT channel benefits from subscription their package can be revised to accommodate this models in several key respects. need. When you can tailor your offering to the precise long and short term needs of your customers, it COST PREDICTABILITY becomes much easier for you to forge meaningful, long-term relationships with them. A customer who subscribes to a products and services is naturally more inclined to maintain the GIVING THE PEOPLE WHAT THEY WANT relationship with the service provider over the long- term. Retention is more profitable than acquisition: Resellers should think of new payment models as where a one-off payment might provide immediate an asset and a vital part of their evolving business gains, it brings no assurance that your most important models. Customers who cannot get the financial consumers will return to buy again. flexibility they desire from your company may well look to competitors who can provide it. When you’re the customers’ XaaS provider of choice, it’s much easier to retain customers, predict your A reseller who is unwilling to adopt new payment revenues, and widen your profit margins over a models may well risk being left behind by their more longer period. adaptable rivals.

VALUE ADDED SERVICES

Resellers are in a unique position to benefit from XaaS. Being able to package several products and services together gives you a distinct advantage. If your customer requires help with setup and implementation, you can roll these costs into the monthly fee; if they require applications from a different software suite, you can include it in the overall cost; if they need to scale up their solution,

5 HOW ‘AS A SERVICE’ IS CHANGING THE CHANNEL WHAT ARE THE BENEFITS FOR CUSTOMERS?

COST-EFFECTIVE All data is stored and backed up offsite. All the customer has to do is pay their subscription Conventional payment models tend to conflict fee and stay connected to the internet. with the end-user’s capital expenditure restrictions. The latest edition of a certain software product might be appealing to them, FLEXIBILITY but if it’s also likely to cause a significant hole in their annual budget, they’re likely to defer XaaS models offer unparalleled flexibility. the purchase until they have no alternative. They make it possible to scale upwards at the customer’s convenience, so if an enterprise XaaS products offer immediate access to the or SME needs additional capacity or licenses, best products available, with little upfront their request can be accommodated easily. investment, and with tremendous value If they need training or assistance with for money. Cloud based solutions can also setup and support, it can be rolled into the automate updates and upgrades – saving final agreement in one convenient monthly, them time as well as cash. quarterly, or annual payment.

Customers love choice. Give it to them, and LESS HASSLE they’ll have every incentive to choose your company. Though there will always be exceptions, most customers are less concerned with control than convenience. XaaS models are very convenient: the heavy IT lifting is done by the reseller and the vendor. No wasting space on server rooms; no wasting time and manpower on maintenance; no building an on-site enterprise infrastructure.

6 HOW ‘AS A SERVICE’ IS CHANGING THE CHANNEL HOW CAN CHANNEL PARTNERS TAKE ADVANTAGE?

Hesitance about subscription-based payment models is understandable – but it should never become complacency. Selling IT as a product may be second nature to you by now, but today’s upfront revenue may well be tomorrow’s commercial dead end. Embracing subscription payment models is the best way to survive and thrive in the near future.

Partnering with a leasing provider will make the transition easier. By acquiring smart funding support, you can supply XaaS products to your customers – while benefitting from expedited invoice payment so that your cashflow is not affected. This helps you manage your finances more effectively, and puts you in a better position to offer further value-add services and payment flexibility.

7 HOW ‘AS A SERVICE’ IS CHANGING THE CHANNEL Microsoft’s cloud products will account for around WHAT DOES THE FUTURE HOLD? 30% These options may well expand in future. While cloud services have come a long way, in many respects, of its revenue by 2018. they’ve just gotten started. (source: Morgan Stanley 2016) It’s anticipated that SaaS will stay dominant, and that it will account for more than two-thirds of public cloud spending by 2019. However, spending on other forms of cloud computing such as IaaS and PaaS is expected to grow at a faster rate – with compound annual growth rates (CAGRs) of 27.0% +47% and 30.6% respectively.

$3.53 The next few years will be characterised by accelerating demand for XaaS solutions. It’s estimated that overall spending on public cloud billion services will grow at a 19.4% CAGR to $141bn in 2019 – a considerable increase on the $70bn spent in 2015.

Q4 2015 Q4 2016 Customers want the low-cost, low-commitment, Amazon web Amazon web on-demand experience, and they want it sooner services services rather than later.

In Q4 2016 Amazon Web Services reported $3.53 billion in revenue – an improvement of $300 million on the preceding quarter, and an improvement of 47% on Q4 2015.

(source: Amazon Web Services, 2017)

8 HOW ‘AS A SERVICE’ IS CHANGING THE CHANNEL THE BNP PARIBAS LEASING SOLUTIONS IT FINANCE OFFER

Of course, it won’t always be that simple. IT solution providers can’t always offer fully cloud- based services from day one. That’s why smart technology financing solutions from leasing providers can be so helpful. It allows you to adjust to new payment models while keeping your existing operations running smoothly.

At BNP Paribas Leasing Solutions, we provide technology providers with finance solutions they need to plan their business transition towards a cloud model. We let you adapt your customer payment schemes to the new era of subscriptions, accommodating both pay-as- you-go and bulk purchase options. By working with us, we will expedite your invoice payment and fully manage the credit risk that comes with collecting rental from the end-user. We ensure the best deal for all parties, and help you maintain the integrity and stability of your cashflow.

Offering cloud services to your customers doesn’t have to be daunting. To find out how we can help your business keep up with consumer demand, contact one of our leasing specialists today. 9